Seeking new funding; Public private partnerships can benefit many sectors in Michigan.

Author:Miziolek, Aleksandra A.
Position:Public Private Partnerships
 
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These are exciting times for Michigan. A week doesn't go by without news of a successful alternative energy initiative, formation of an innovative financing task, force or an interesting infrastructure project like the recently announced $371 million project to build a regional light rail system from downtown Detroit to the State Fairgrounds. With the increased focus on our infrastructure needs, especially in the transportation and energy sectors, it is only logical and prudent that Michigan join the now overwhelming majority of states in actively exploring the merits of Public Private Partnerships (P3s).

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Some would point out that the P3 label is just a new fangled way of referring to the traditional collaboration between the public and private sectors. Undoubtedly, Michigan's long standing history of such collaboration has reaped many benefits to our state over the years. However, the P3 model of the 21st century presents distinctly different opportunities and challenges alike and is well worth careful analysis.

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Our Canadian neighbors, as well as countries throughout Europe and Asia, have long utilized a concession based P3 model as an effective way to efficiently modernize existing infrastructure and enhance the quality and delivery of public services. Under a concession model P3, the private investor would enter into a long term concession agreement with a public entity in return for either a significant cash payment up front, a recurring stream of payments over time, or a combination of both. The private investor would be responsible for the design and construction (if new) and the operation and maintenance of the project, while the governmental entity would retain ownership rights and control over areas of public interest, such as quality standards, safety issues, price increases and labor protection.

2008 is proving to be a significant year for P3 activity around the country. Just this year, Alabama, Arizona, Iowa, Kentucky, New Hampshire and West Virginia officially joined the debate by holding hearings on comprehensive PPP legislation. Most states have now adopted or are considering different variants of P3 legislation. Certain states, such as Texas, have come full circle, from aggressively embracing the P3 model to a moratorium and back to a more moderate approach to P3 funding.

Michigan will definitely benefit from the many lessons learned in the P3 arena. Thus far, transportation...

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